Do it yourself

I find the current market narrative on social media being dominated by three topics: 1.     A study released by the market regulator SEBI, highlighting that 93% of traders participating in the Indian derivatives markets end up losing money. In the past three years they have lost over Rs1.8trn, trading future and option securities. Most of these were household (retail) traders, who declared an annual family income of less than Rs five lacs each. A few institutional and high frequency traders made gains at the expense of these retail traders. Intermediaries also gained substantially through brokerage and other charges. The market participants, observers and policymakers are now debating (i) whether the large players are manipulating the market to dupe retail investors; and (ii) whether the entry of small traders should be restricted in the derivative segment of the securities market. In the meanwhile, as per the SEBI survey, about 75% of the traders who lost money in...

  The traders and investors, who directly access the trading platforms of brokers, are reminded and forced to acknowledge, every time they log in to the trading system, “9 out of 10 individual traders in the Equity Futures and Options Segment, incurred net losses”. This is in fact one of the conclusions of a study conducted by the Securities and Exchange Board of India (SEBI) (published in January 2023). From my study of the Indian stock markets in the past three decades, I understand that this conclusion is no exaggeration. This state of affairs raises two pertinent questions: (i)        How sustainable a market is where 90% of participants are losing money consistently? (ii)       Does not this pose a material systemic risk for our markets, especially under the present circumstances where the global financial and geopolitical conditions are worsening every day, and the probability of an eight-sigma event like 9/11 attack and ...